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Steamship Mutual profit slips

Steamship Mutual Underwriting Association is poised to report only a modest profit as it draws a line under three exceptionally lucrative years.

The protection and indemnity club only made a $5.7m surplus for the year to February 2018, in contrast to the more than $200m rang up over the previous three years.

The reduction in profitability reflects premium returns to members and four years without general increases, so paints rather too pessimistic a picture of Steamship Mutual’s performance.

The combined ratio for last year was 112.8%, pointing to a significant underwriting loss when break-even comes in at 100%. But if a $25.6m premium return is taken out of the figures, the combined ratio falls to a marginally unprofitable 102.1%, although still a little above the club’s aim of a balanced result.

Another way of looking at the result is to add the premium return to the surplus. The profit is then $31.3m, under half the surplus of recent years but quite a reasonable figure.

The small profit lifts Steamship Mutual’s free reserve to $516m, so well in excess of the number required to justify an A rating from Standard & Poor’s.

Steamship Mutual recorded an investment gain of $39.3m, equivalent to a 3.5% return.

Chief executive Gard Rynsard said the free reserve is relatively strong compared to other clubs and is at a record high.

So what are the chances of the club’s shipowner directors agreeing to return more capital to members when they meet in October?

While not pre-empting the board, he said the reserves are sufficient to consider a further return of premium.

“They’ll be looking at all the factors to see whether it's appropriate,” Rynsard said.

Steamship Mutual is reporting higher claims for the year to February, but more a reversion to the higher level seen a few years ago, rather than a dramatic deterioration.

“We have had some exceptionally good years," Rynsard said. "Claims have basically gone back to the earlier level.”

Steamship Mutual also had three claims large enough to be pooled with the other P&I clubs, including the 164,000-dwt Iranian tanker Sanchi (built 2008), which caught fire, exploded and sunk off China with the loss of all 32 crew. There was also the sinking of the 266,141-dwt ore carrier Stellar Daisy (built 1993), with the loss of 22 seafarers, and a sizeable lost cargo claim from the 1,700-teu containership Log-In Pantanal (built 2007).

Rynsard also cited "churn" — the fact that new tonnage, subject to competition between the clubs, is insured at significantly lower rates than vessels being sold or scrapped, that have paid repeated general increases — as an issue contributing to the deterioration in the premium to claims balance.

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Steamship Mutual profit slips

Steamship Mutual Underwriting Association is poised to report only a modest profit as it draws a line under three exceptionally lucrative years.

The protection and indemnity club only made a $5.7m surplus for the year to February 2018, in contrast to the more than $200m rang up over the previous three years.

The reduction in profitability reflects premium returns to members and four years without general increases, so paints rather too pessimistic a picture of Steamship Mutual’s performance.

The combined ratio for last year was 112.8%, pointing to a significant underwriting loss when break-even comes in at 100%. But if a $25.6m premium return is taken out of the figures, the combined ratio falls to a marginally unprofitable 102.1%, although still a little above the club’s aim of a balanced result.

Another way of looking at the result is to add the premium return to the surplus. The profit is then $31.3m, under half the surplus of recent years but quite a reasonable figure.

The small profit lifts Steamship Mutual’s free reserve to $516m, so well in excess of the number required to justify an A rating from Standard & Poor’s.

Steamship Mutual recorded an investment gain of $39.3m, equivalent to a 3.5% return.

Chief executive Gard Rynsard said the free reserve is relatively strong compared to other clubs and is at a record high.

So what are the chances of the club’s shipowner directors agreeing to return more capital to members when they meet in October?

While not pre-empting the board, he said the reserves are sufficient to consider a further return of premium.

“They’ll be looking at all the factors to see whether it's appropriate,” Rynsard said.

Steamship Mutual is reporting higher claims for the year to February, but more a reversion to the higher level seen a few years ago, rather than a dramatic deterioration.

“We have had some exceptionally good years," Rynsard said. "Claims have basically gone back to the earlier level.”

Steamship Mutual also had three claims large enough to be pooled with the other P&I clubs, including the 164,000-dwt Iranian tanker Sanchi (built 2008), which caught fire, exploded and sunk off China with the loss of all 32 crew. There was also the sinking of the 266,141-dwt ore carrier Stellar Daisy (built 1993), with the loss of 22 seafarers, and a sizeable lost cargo claim from the 1,700-teu containership Log-In Pantanal (built 2007).

Rynsard also cited "churn" — the fact that new tonnage, subject to competition between the clubs, is insured at significantly lower rates than vessels being sold or scrapped, that have paid repeated general increases — as an issue contributing to the deterioration in the premium to claims balance.